12 months to 31 December 2023
- Stock markets up as inflation eases and central banks hit ‘pause’ on further interest rate rises.
- UK base rate held at 5.25% (Sept) after 14 consecutive rises, from a low of 0.1% in March 2020.
- Oil prices fall as weak global demand offsets supply issues.
- All Virgin funds provided positive returns in 2023, with our Adventurous approach (Growth Fund 3) leading the way with a return of 11%.
Inflation and interest rate pressures start to ease
The annual rate of inflation in the UK fell to 3.9% for the 12 months to end November, which was a bigger fall than expected and closer to the Bank of England’s 2% target. Turn back the clocks a year, and the annualised rate was 10.7%.
Inflation has also been falling in the US and Europe. It doesn’t mean that, globally, prices are lower, just that the rate that prices have been rising has slowed. The shock to food prices caused by the conflict in Ukraine hasn’t gone away but the situation has stabilised.
Central banks around the world raised interest rates to curb inflation. But now, both in the US and the UK, rate rises have paused and the next move is expected to be down. This could be in the spring in the US and shortly afterwards in the UK, assuming no further inflationary shocks. Although any reduction in rates is likely to be gradual and it’s unlikely we’ll see a return of cheap money (UK rates were cut to 0.1% in reaction to Covid). That’s unless something bad happens, of course, such as a deep recession or another pandemic.
Lower oil prices
A big driver of inflation has been oil and gas prices following the breakout of war in Ukraine. The price of a barrel of oil hit $140 in early 2022, fell to just over $70 in March and rose again to $100 by Sept 2023. Since then, concerns over global demand caused prices to fall back once more to just under $80 by the end of the year.
Lower oil prices are generally good for corporate profitability and thus stock markets. However, some firms and countries benefit from higher oil prices. OPEC, led by Saudi Arabia (one of the world’s bigger exporters), has sought to restrict supply to maintain or push up prices further. These supply restrictions have been offset recently by the less-than-rosy global economic growth picture.
Virgin Money investment funds
Overall, 2023 was a good year for our investment funds, with positive returns ranging from 5.0% for our Climate Change Fund, to 11.0% for our ‘Adventurous’ fund, Growth Fund 3. Returns for our three growth funds were 7.5%, 9.5% and 11.0% in order of risk. Follow the links from our funds page to see the return for each of our funds over the last five years.
Remember, the value of investments can go up and down, so you may get back less money than you put in. Tax depends on your individual circumstances and the regulations may change in the future.
Your quarterly market update - a look back in time
Autumn 2023 market update
The Autumn market update covers market activity for 12 months to 30 September 2023
Summer 2023 market update
The spring market update covers market activity for 12 months to 30 June 2023
Spring 2023 market update
The spring market update covers market activity for 12 months to 31 March 2023
Take a look at the performance of our funds